Bank vs. Mortgage Agent

Agent - not only if bad credit! Three main reasons to use a Mortgage Agent:
1. Access to MANY lenders (including big banks) -> much wider selection of products.
2. Ability to get lower interest rate.
3. Saving your time and effort to visit many lenders in person.

Mortgage agents find low rates for a living, and they don't get paid unless you sign a mortgage through them, so they're highly motivated to get you the best deal

Toronto mortgage low rateMortgage agents provide buyers with an expert mentor to navigate the complex mortgage origination process. By offering superior market expertise and direct access to many different loan programs, the mortgage agent provides buyers the most efficient and cost-effective method of obtaining the right mortgage that meets the consumer's financial goals and circumstances.

A recent Canada Mortgage & Housing Corporation report showed that an increasing number of home buyers, especially first-time buyers, are using mortgage agents rather than getting a home loan direct from mortgage lenders. The CMHC report showed an increase in using agents, up from 32% in 2012 to 42% in 2015 and the CBC article says that buyers are looking for personalized service and don't like having to wait for banks to get back to them; they want great rates and they want them now, so they prefer quick turnaround times offered by mortgage agents to their clients.

Reason 1 to use a Mortgage Agent:

Access to MANY lenders (including big banks) -> much wider selection of products

Several banks have their own mortgage consultants, who actively seek borrowers for them. The major differentiating factor between a bank's consultant and a mortgage agent is that, while both are dedicated to providing the best solutions to their clients, banks workers can only place their clients with the bank by whom they are employed and therefore do not have access to all of the different products available in the market. In contrast, mortgage agents shop among many sources to find the absolute best rate - not only with major banks, but also with credit unions, caisses populaires (meaning "people's bank" in French), pension funds, MICs (mortgage investment corporations), loan and trust companies, finance companies and other corporations constructed to lend money on real estate (including private lenders). Most of these lenders do not employ their own consultants and operate only through mortgage agents/brokers. [REMARK: from your perspective as a client, "mortgage agent" and "mortgage broker" are exactly a same kind of professionals; their licences only differ in dutes, allowed to be carried out inside the brokerage, but not in the work they do for their clients.]

Not standard products

Just as a mortgage agent can shop around for a competetive rate quote, an agent can also shop around for a specific loan program that not all lenders carry - some lenders introduce a product no one else offers.

Most lenders offer the very same staple of mortgage programs. For example, almost every lender offers 25-years fixed-rate mortgage. But some lenders also have alternative loan programs designed for specific lending circumstances. Although most lenders offer the same core loan programs, no one lender (including your bank) has all programs.

If your bank doesn't have the product which is best for you, you're stuck without that product. A mortgage agent, however, can simply call the lender offering the specific loan program and voilà!

Let's read what Blair Anderson writes in his (highly recommended!) book "Ask Your Mortgage Broker":

"Getting favourable rates and terms is just one advantage for using a mortgage broker. As an independent unbiased representative working on your behalf, a mortgage broker has access to over thirty lenders in Canada, giving you the greatest number of choices with the least amount of effort. Only your mortgage broker can speak openly to you about what every lender has to offer. The number one goal is to put you into a mortgage that best suits your individual needs. Which lender you are placed with is of secondary importance."

Reason 2 to use a Mortgage Agent:

Ability to get lower interest rate

The general belief is that brokers can offer a better rate than banks due to their access to multiple lenders. The Bank of Canada survey found that using a broker can result in getting a lower rate. Part of that is due to them getting multiple quotes from various institutions.

What is the reason of rates lower than in the bank?

Many of sub-prime and private lenders provide good-rate mortgages because they have much less operating costs: they keep small number of employees, occupy small offices (not huge office facilities on major intersections) and save on advertisement. In addition, you do not overpay for the brand: some of small lenders, offering competative rates, are owned by large banks! In fact, those banks operate separate mortgage divisions, called "wholesale departments", that find mortgage agents/brokers who will send borrowers to them. Wholesale lenders hire marketing executives whose only job is to find mortgage agents/brokers who will market their loans for them. And it makes a lot of sence - there is a lot of overhead involved in running any business (office space, employees, utilities, insurance, employment taxes, compliance issues... well, there is a lot). A wholesale lender finds mortgage brokerages willing to use their own office, computers, and marketing expertise in exchange for a wholesale-price loan. A mortgage agent's earnings can be considered not too bad from the viewpoint of an ordinaly individual, but this money is quite insignificant for such serious organization as a bank.

Let's keep reading the book "Ask Your Mortgage Broker":

"...lenders have a number of ways to source new business. These sources or "distribution channels" as the banks like to call them, each come with their own set of operating costs. That's where mortgage brokers come in. They are the most cost effective and efficient operation the banks have for originating, or acquiring new mortgage business. Compared to the bank's oldest distribution channel (their branch network), the mortgage broker channel is far less expensive to operate."

"...[Bank] branch staff are trained and motivated to make the branch as profitable as possible. This directly affects the bonuses handed out to staff at the end of the year. So don't expect anyone at the branch to be overly generous when it comes to discounting your rate or advising you on any mortgage terms and strategies that will cost them money."

What if a mortgage agent finds that your bank's loan is the best?
After all, you could get it directly in the bank... Will you pay extra money for agent's intermediary services? No. Although mortgage agents earn their living from commissions, that doesn't necessarily mean that using a mortgage agents adds to your costs of obtaining a loan. The interest rate (and other conditions) for most mortgages obtained through an agent may well be the same as you'd pay a bank directly. Banks reason that they can afford to share their normal fees with an outside agent who isn't employed by the bank, because if you had gotten the loan directly from the bank, you would have had to work with and take up the time of one of the banks's own mortgage employees.

Reason 3 to use a Mortgage Agent:

Saving your time and effort to visit many lenders in person

You can go to your bank and find out what it offers. After that, you may spend a few hours or days visiting other banks and find what they have for you. Then you need to compare all the products (i.e. to conduct a thorough comparative analysis of all the data) and define which one suits your interests and situation best. But that is exactly what a mortgage agent will do for you in a professional manner using the purpose-designed software! Furthermore, a mortgage agent will take into account much more lenders than you physically can visit, including those who do not work with the public directly.

Searching for the most suitable mortgage for your requirements along with your budget may be a tough and often challenging task. The variety of mortgage products currently available ensures that clients can benefit from a variety of options, and these kinds of options improve the likelihood of getting an excellent value mortgage loan. However, the draw back is that you could possibly find yourself wasting hours scouring through the mortgage deals from numerous lenders, and although you are occupied trying to understand the financial terms that most lenders may possibly toss at you, another buyer could possibly snatch the property of your dreams from under your nose.

Going it on your own when searching for an ideal mortgage is a time consuming process. With the speed of life as it stands today, most of us hardly have time and energy to sit back and appreciate a little bit of quality valuable time as it is. Wasting hours attached to the computer or ringing around numerous lenders is one thing that most of us are capable of doing without. Should you go straight from lender to lender to obtain your mortgage, you will end up needing to complete a brand new application for each and every lender, which unfortunately waste significant amounts of time. More time is going to be taken up with searching and researching all the different deals with each lender, in addition comparing the loan providers against each other.

This is the reason that you will require a mortgage specialist that is not only exclusively knowledgeable on just about all of the latest information and facts, but understands the intricacies of the mortgage business. A mortgage specialist will be capable of acquiring the best package to meet your needs while protecting your new mortgage payment to your financial budget. This is certainly accurate of unbiased mortgage brokers.

Making use of a mortgage broker is an excellent means of acquiring a mortgage deal to suit your requirements without needing to devote several hours of your time to researching and browsing. Usually when you use a mortgage broker service, you can simply be eliminating all of the time and work associated with finding a mortgage to match your conditions. An excellent advantage is the fact that the mortgage broker works for you, the client, and typically don't charge a fee (except if you have a unprecedented financial situation), because the financial institutions compensate them right after they close the mortgage deal.

A great mortgage specialist are in a position to source a wide selection of mortgage loan deals on your behalf, and will then recommend those which offer the best value with regards to interest rates and monthly payments. All you need to do is complete one simple application form, which will save you the inconvenience of having to complete an application for each and every lender in which you are interested.

A reputable mortgage broker will have already got formed links, contacts, and associations with a variety of mortgage lenders. The individual will subsequently be familiar with which lenders may accommodate your specific needs. Take for instance, for those who have a poor credit score and you are searching for a reasonably priced mortgage, the broker probably will identify which lenders provide convenient finance to individuals with a damaged credit score and can consequently approach the appropriate lenders immediately. Should you be looking for a bad credit mortgage without the help of an agent, you might find yourself going through one application after another with countless unsuitable lenders, so you could end up with a long line of refusals, which may make your credit score a whole lot worse.

In spite of all that, why many people don't "think outside the branch"?

When you are waitng in a line to your bank teller, look around and you will see the answer - it's advertisement. Folks simply do not know that they can get help from independent agents (not even aware of their existence!), so when it becomes necessary to take a mortgage, that advertisement immediately comes to mind, and they just go to their bank.


Once you are interested in obtaining a mortgage, then you most likely will also be interested in the help of an experienced real estate agent:

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